| Thu 13 Sep 2007, 12:34 | | GMB - Glenrand MIB Limited - Audited summarised re |
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GMB
GMB
GMB - Glenrand MIB Limited - Audited summarised results for the year ended 30
June 2007
Glenrand MIB Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008001/06)
("Glenrand MIB" or "the group")
JSE share code: GMB ISIN: ZAE000078010
Audited Summarised Results for the year ended 30 June 2007
* Increased HEPS to 6,7 cents per share from 12,3 cents loss
in 2006
* Growth of continuing profits to R40,7 million from a loss
of R3 million
* Continuing revenues up by 7% to R421 million
* Refocused as a risk services company
Dr Dudu Kunene, Chairman and Acting CEO Glenrand MIB commented: "We have made
much progress in the last year. We have repositioned the company as a risk
services business following a number of disposals and have been active in
building the business organically and through acqusitions. We have been
successful with our new business flow and have retained our position as market
leaders in the corporate sector. The group has now returned to profitability and
we are focused on ensuring that the positive momentum continues as we go
forward."
Overview
During the period the group returned to profitability and made significant
progress towards the implementation of various strategic enablers in support of
our plans to grow the business. The results were achieved against the backdrop
of returning the business to core risk services.
Our Risk Services business provides short-term insurance broking, risk advisory
services and claims and policy administration to clients across the economic
spectrum from multinational organisations to private individuals.
FINANCIAL REVIEW
The results for the year have been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting Standards
(IFRS) and the presentation and disclosure requirements of IAS 34 - Interim
Financial Reporting. The past year bears testimony to a turnaround effort that
is gaining momentum and accordingly the group is reporting an increase in
headline earnings per share from a loss of 12,3 cents per share to a profit of
6,7 cents per share. In addition, earnings per share grew from 20,8 cents to
35,6 cents per share, mainly due to the recognition of profits on the disposal
of non-core assets.
Income statement
Despite an increase in continuing revenues in Risk Advisory Services, overall
profitability continued to be eroded due to the losses sustained in Benefit
Services. Despite the highly competitive market conditions, the flow of new
business has been ahead of expectations and client retention remains high. The
margins in Risk Advisory Services were impacted by investments in strategic
enablers such as information technology and the retention of specialist skills.
The profit on disposal of assets almost exclusively accounts for headline
earnings adjusting items. The effective tax rate applied to earnings has been
distorted as a result of the write-off of irrecoverable intercompany loans.
Balance sheet and cash flow
The consolidated balance sheet reflects policyholder liabilities and linked
investments backing policyholder contracts. Policyholder assets match the
corresponding liability when including amounts disclosed in current assets and
liabilities. These liabilities are therefore excluded when calculating gearing,
which remains low at 1,1%. The group continued to generate cash from its Risk
Advisory operations which was offset by the funding requirements of Benefit
Services. It is the intention to increase the gearing ratio where appropriate
during the execution of our acquisition strategy to leverage our return on
investments made.
STRATEGIC DEVELOPMENTS
Acquisitions
The group has commenced its strategy of growing its risk advisory services
business through acquisitions. The purchase of Bymac Insurance Brokers (Pty)
Limited positions Glenrand MIB as the largest broker in the Eastern Cape region.
By the end of the period, the group was in advanced stages of acquiring the
business of Finrite (Proprietary) Limited and an announcement to shareholders to
that effect was subsequently made. The purchase will be earnings enhancing from
the effective date and serves to diversify revenue streams and positions us
behind sales channels previously inaccessible to us. It also complements our
growth strategy in high volume markets. We remain selectively acquisitive and
other opportunities are receiving consideration.
International partner
Glenrand MIB concluded an exclusive trading agreement with Jardine Lloyd
Thompson Plc. As our international partner, JLT is listed on the London Stock
Exchange and is the sixth largest company of its type in the world. JLT operates
in more than 30 countries, employs over 5 000 staff and has more than 100 owned
offices worldwide. In terms of the agreement, Glenrand MIB will be the sole
trading partner for JLT in Southern Africa.
Disposals
We disposed of our investments in Admiral Professional Underwriting Agency (Pty)
Limited and Holmwoods and Back and Manson (South Africa) (Pty) Limited during
the period. The process of disposing of our investments in non-core businesses
is now complete.
Benefit Services
Benefit Services, which is a provider of consulting, healthcare, actuarial and
administration services within the retirement fund industry has, for a continued
period of time, made losses despite several attempts by Glenrand MIB to return
the business to profitability. After careful consideration, the Glenrand MIB
Board resolved to dispose of its interest in Benefit Services. The disposal is
subject to the fulfilment of conditions precedent, particularly obtaining
Regulatory approval, which we estimate will be obtained in October 2007.
Group structure and costs
A number of projects are underway to restructure the group and operational units
to increase efficiency and reduce duplication of costs. Initial saving
opportunities have been identified and were included in the budgets for 2008,
including procurement savings of R10 million. The initiative will continue into
next year.
BEE credentials
We are continuing our efforts towards transformation which affects every part of
the business, from skills development to procurement. We were delighted when
Empowerdex awarded us an A rating during the year.
PROSPECTS
With the sale of Benefit Services, we can now focus all our efforts on the Risk
Services business. Management is confident that the positive effects of an
acquisitive strategy, cost management exercises and investments in strategic
enablers will benefit future results.
DIRECTORATE
The process to appoint a CEO will be concluded in due course and Dr MF Kunene
continues in his role as acting CEO to the group. Mr G Whitcher was appointed as
Chief Financial Officer on 29 November 2006 and Mr N Payne was appointed as a
non-executive director on 6 December 2006. Ms T Mgoduso was appointed as an
alternate non-executive director to Mrs H Nyasulu effective 3 July 2007.
DIVIDEND
Although the group has returned to profitability after a number of loss making
years, the Board of Directors has resolved not to declare a dividend in respect
of this financial year.
An interim dividend of 4 cents and a special dividend of 16 cents per share was
paid in respect of 2006.
On behalf of the Board of Directors
Dr M F Kunene G Whitcher
(Chairman and Acting CEO) (Chief Financial Officer)
12 September 2007
Income Statement
for the year ended 30 June
2007 2006*
Note R`000 R`000
Continuing operations
Revenue 421 616 393 856
Employment benefits expenses (248 544) (222 852)
Rent and IT expenses (43 794) (41 684)
Amortisation and depreciation (15 250) (16 837)
Other expenses (96 832) (116 065)
Finance costs (7 412) (5 357)
Disposals and impairments 2 593 (5 482)
Investment income 31 169 26 671
Share of profit of equity accounted 788 774
investees
Profit before taxation 44 334 13 024
Taxation (3 604) (16 046)
Profit (loss) from continuing 40 730 (3 022)
operations
Discontinuing operations
Profit from discontinuing operations 3 43 486 65 531
(net of taxation) including the profit
on disposal of discontinued operations
Profit for the year 84 216 62 509
Profit attributable to:
Minority interest 3 674 12 899
Shareholders of Glenrand MIB 80 542 49 610
84 216 62 509
Earnings per share
Basic earnings per share (cents) 35,6 20,8
Diluted earnings per share (cents) 35,6 19,4
Continuing operations
Basic earnings (loss) per share (cents) 17,0 (4,0)
Diluted earnings (loss) per share 17,0 (3,7)
(cents)
Headline earnings (loss) per share 4 6,7 (12,3)
(cents)
Diluted headline earnings (loss) per 4 6,7 (11,5)
share (cents)
Number of shares (net of treasury
shares)
- Weighted average (000`s) 226 526 238 682
- Diluted weighted average (000`s) 226 526 255 594
* Restated refer to note 2
Statement of Recognised Income and Expenses
for the year ended 30 June
2007 2006
R`000 R`000
Actuarial (loss) gain on defined benefit plan (1 156) 97
Deferred taxation on defined benefit actuarial 335 (28)
(loss) gain
Translation of foreign subsidiaries 1 976 1 448
Income and expenses recognised directly in 1 155 1 517
equity
Profit for the year 84 216 62 509
Total recognised income and expenses for the 85 371 64 026
year
Attributable to:
Minority interest 3 674 12 899
Shareholders of Glenrand MIB 81 697 51 127
Total recognised income and expenses for the 85 371 64 026
year
Balance Sheet
as at 30 June
2007 2006*
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 23 378 30 362
Investment properties 6 464 6 464
Goodwill 31 457 35 449
Intangible assets 52 971 48 699
Deferred taxation asset 40 642 41 872
Investments 3 783 4 810
Long-term accounts receivable 6 615 14 921
Linked investments backing policyholder - 5 129 803
contracts
Non-current assets 165 310 5 312 380
Other current assets 427 724 335 622
Accounts receivable policyholders - 210 721
Current assets 427 724 546 343
Assets classified as held for sale 5 576 409 55 806
Total assets 6 169 443 5 914 529
Equity and liabilities
Equity
Shareholders` equity 192 405 107 171
Minority interest 4 037 17 070
Total equity 196 442 124 241
Liabilities
Non-current liabilities
Long-term liabilities 34 643 37 738
Deferred taxation 117 117
Policyholder liabilities - 5 244 552
Non-current liabilities 34 760 5 282 407
Other current liabilities 352 411 396 039
Accounts payable policyholders - 95 972
Current liabilities 352 411 492 011
Liabilities classified as held for sale 5 585 830 15 870
Total liabilities 5 973 001 5 790 288
Total equity and liabilities 6 169 443 5 914 529
Cash Flow Statement
for the year ended 30 June
2007 2006
R`000 R`000
Cash generated by operations 17 502 29 045
- Continuing 53 741 38 119
- Discontinuing (36 239) (9 074)
Working capital changes (3 794) (133 055)
Investment income received 39 721 37 363
Interest paid (8 842) (11 510)
Taxation paid (18 045) (27 283)
Dividends paid (2 587) (71 157)
Cash inflow (outflow) from operating 23 955 (176 597)
activities
Cash inflow (outflow) from investing 62 310 (28 347)
activities
Cash inflow (outflow) from financing 4 452 (46 475)
activities
Net increase (decrease) in cash and cash 90 717 (251 419)
equivalents
Cash and cash equivalents at beginning of 164 135 414 127
year
Effect of exchange rate fluctuations on cash 1 801 1 427
held
Cash and cash equivalents at end of year 256 653 164 135
Segmental Analysis
for the year ended 30 June
2007 2006
Note R`000 R`000
Segmental revenues
Risk Advisory Services# 431 219 452 018
- Continuing 421 616 393 856
- Discontinuing 9 603 58 162
Benefit Services 85 329 100 684
Total segmental revenues 516 548 552 702
Segmental results
Risk Advisory Services# 22 705 21 136
- Continuing 18 197 (4 392)
- Discontinuing 4 508 25 528
Benefit Services (35 842) (37 533)
Total segmental losses 6 (13 137) (16 397)
# Risk Advisory Services includes Risk Services South Africa, Africa and group
costs.
Notes to the Financial Statements
1. Basis of accounting
These consolidated provisional results are prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS), the disclosure requirements of IAS 34 - Interim Financial
Reporting and the South African Companies Act of 1973, as amended. The
accounting policies are consistent with those applied for the year ended 30 June
2006, except as stated below.
During the year the group decided to recognise actuarial gains and losses in
equity and not in the income statement as in previous years. This change in
accounting policy was due to the adoption of the Amendment to IAS 19 Employee
Benefits - Actuarial Gains and Losses, Group Plans and Disclosures. The June
2006 comparatives have been restated as detailed in note 2.
Share-based payments of equity accounted investees
The group had previously not accounted for the Admiral Executive Share Scheme in
terms of IFRS 2 Share-based payments. The Scheme is classified as a cash settled
share-based transaction according to this statement. The effect on the income
statements and balance sheets at 30 June 2006 are reflected below.
2. Adjustments
Reconciliation of financial information previously reported
Reconciliation of income statement
Restated year ended 30 June 2006
R`000 R`000 R`000
Profit Profit
before after
taxation Taxation taxation
As previously reported 93 819 (30 965) 62 854
Adjusted for
- Share-based payments (276) - (276)
- Actuarial gain (97) 28 (69)
Adjusted results 93 446 (30 937) 62 509
Reconciliation of balance sheet
Share-
holders`
equity
30 June 2006 as previously reported 128 485
Share-based payments (4 244)
Restated 30 June 2006 124 241
3. Discontinuing operations
The group announced the disposal of its investment in Glenrand MIB Benefit
Services (Pty) Limited on 28 June 2007, subject to the fulfilment of certain
conditions. It further disposed of Holmwoods and Back and Manson (South Africa)
(Pty) Limited, with effect from 30 September 2006, and Admiral Professional
Underwriting Agency (Pty) Limited with effect from 30 March 2007. Accordingly,
the results from these businesses are disclosed as discontinued operations.
During the previous financial year the group disposed of its Reinsurance
Consultants division, as well as its investment in Websoft (Pty) Limited.
2007 2006
R`000 R`000
4. Calculation of headline earnings (loss)
Earnings attributable to ordinary shareholders 80 542 49 610
Adjusted for
Impairment and disposals of assets 307 5 038
Profit on disposal of investments and (84 513) (84 033)
subsidiary companies
Fair value adjustment for subsidiary company 9 824 -
held for sale
Taxation effect 8 999 80
Minority interest 4 9
Headline earnings (loss) 15 163 (29 296)
5. Acquisition of subsidiary
Goodwill arose on the transactions during the period as follows:
Net assets acquired (1) -
Consideration paid 10 279 -
Goodwill and intangibles arising 10 278 -
On 1 September 2006 the group acquired all of the shares in Bymac Insurance
Brokers (Pty) Limited.
The company is a Port Elizabeth based insurance broker which has been fully
integrated into our current Port Elizabeth operations.
The business contributed profit before taxation of R2,1 million.
If the acquisition had occurred on 1 July 2006, management estimates that the
additional revenue would have been R7 million and additional profit for the year
would have been R1,5 million.
6. Segmental analysis
6.1 Reconciliation of statutory to segmental profit
Statutory profit before tax 99 799 93 446
Continuing 44 334 13 024
Discontinuing 55 465 80 422
Adjusted for
Investment income (39 721) (37 363)
Finance costs 8 842 11 510
Share of profits of equity accounted (7 675) (4 995)
investees
Headline adjusting items (74 382) (78 995)
Total segmental losses (13 137) (16 397)
6.2 Segmental analysis of group costs
Risk Advisory Services
Risk Services South Africa 54 283 48 831
Africa and Underwriting 482 1 311
Unallocated group costs 31 139 63 343
Benefit Services 16 043 7 544
Total group costs included in segmental profit 101 947 121 029
Group costs entails the following:
IT, Marketing, Operating Leases, Payroll, Compliance, Risk and Legal, Group
Finance, Secretarial and the Executive Office.
7. Audit report
These provisional consolidated results and consolidated annual financial
statements for the year have been audited by KPMG Inc., and their unqualified
audit report is available for inspection at the company`s registered office.
8. Reconciliation of movement in capital and reserves
for the year ended 30 June
Treasury
Share shares and
capital share- Non-
based
and payment Distri- Retained
share butable
R`000 premium reserve reserves earnings
Balance at 30 June 2005 48 745 (776) 44 679 33 493
Changes in equity for 2006
Total recognised income and - - 1 448 49 679
expense for the year
Issue of treasury shares 1 613 (1 617) - -
Issue of shares to BBPs 2 067 - - -
Shares purchased by - (36 690) - -
subsidiary company
Share options exercised - 1 682 - -
Share-based payment reserve - 21 078 - -
Trade mark amortisation - - (9 979) 9 979
reserve transfer
Further acquisition of - - - -
shares in subsidiary
Share of profits of equity - - 3 193 (3 193)
accounted investees
Dividends paid - - - (58 230)
Balance at 30 June 2006 52 425 (16 323) 39 341 31 728
Changes in equity for 2007
Total recognised income and - - 1 976 79 721
expense for the year
Issue of shares by - - - -
subsidiary company
Sale of shares in subsidiary - - - -
company
Share-based payment reserve - 3 537 - -
Trade mark amortisation - - (6 653) 6 653
reserve transfer
Share of profits of equity - - (4 715) 4 715
accounted investees
Dividends paid - - - -
Balance at 30 June 2007 52 425 (12 786) 29 949 122 817
8. Reconciliation of movement in capital and reserves
for the year ended 30 June
Shareholders` Minority Total
R`000 equity interest equity
Balance at 30 June 2005 126 141 18 160 144 301
Changes in equity for 2006
Total recognised income and 51 127 12 899 64 026
expense for the year
Issue of treasury shares (4) - (4)
Issue of shares to BBPs 2 067 - 2 067
Shares purchased by (36 690) - (36 690)
subsidiary company
Share options exercised 1 682 - 1 682
Share-based payment reserve 21 078 - 21 078
Trade mark amortisation - - -
reserve transfer
Further acquisition of - (1 062) (1 062)
shares in subsidiary
Share of profits of equity - - -
accounted investees
Dividends paid (58 230) (12 927) (71 157)
Balance at 30 June 2006 107 171 17 070 124 241
Changes in equity for 2007
Total recognised income and 81 697 3 674 85 371
expense for the year
Issue of shares by - 367 367
subsidiary company
Sale of shares in subsidiary - (14 487) (14 487)
company
Share-based payment reserve 3 537 - 3 537
Trade mark amortisation - - -
reserve transfer
Share of profits of equity - - -
accounted investees
Dividends paid - (2 587) (2 587)
Balance at 30 June 2007 192 405 4 037 196 442
Directorate:
*Dr M F Kunene (Chairman and Acting Chief Executive Officer), P Cooper (Alt), R
G Cottrell, G T Ferreira, D J Harpur, A W Mansfield, M R Mashishi, T N Mgoduso
(Alt), T H Nyasulu, N Payne, *G Whitcher. Group Secretary: E Price *Executive
Registered Office:
288 Kent Avenue PO Box 2544 Randburg 2125 Tel (011) 329 1111 Fax (011) 329
1333 email info@glenrandmib.co.za website www.glenrandmib.co.za
Licensed Financial Services Provider Number: 11228
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Limited 70 Marshall Street
Johannesburg 2001 PO Box 61051 Marshalltown 2107 South Africa Tel (011) 370
5000 Fax (011) 688 7715
Investment Bank and Sponsor:
Nedbank Capital
Date: 13/09/2007 12:34:01 Produced by the JSE SENS Department.
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